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Volume2, No.
2,
August 2003
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Does the Varian Mechanism
Work?--Emissions Trading as an Example
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Yasuyo
Hamaguchi*
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Faculty
of Economics, Kyoto sangyo University, Japan
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Satoshi Mitani
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Matsui
Securities Co., Ltd., Japan
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T
atsuyoshi
Saijo
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Institute of social and Economic Research, Osaka
University, Japan
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Abstract
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This
paper investigates whether Varian's(1994)
compensation mechanism can work in a laboratory. The
results show that this mechanism does not work as in
the theory. We found that the magnitude of penalties
crucially affects subjects' behavior.
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Key words
: emissions trading; compensation
mechanism; experiments
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JEL classification
: C91; D62; Q25
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